Most occupiers read vacancy as a single figure, a snapshot of space available today. The more useful question is where that figure is heading.
Falling vacancy generally means available supply is being absorbed faster than new space arrives, and landlords gain confidence on rent, incentives and terms. Rising vacancy tends to hand occupiers more choice, more time and greater room to negotiate.
Not all vacancy is equal. The real opportunity often sits within a specific precinct or building grade, not the national average.
Australia’s current office market illustrates this well. National vacancy sat at 15.9% in early 2026, yet premium CBD vacancy has continued falling, down to 10.2% by mid-year, as occupiers concentrate demand into fewer, higher-quality buildings with strong transport access and sustainability credentials. A tenant may hold real leverage in an older building while facing a tighter market for premium space in the very same city, and the two markets can move in opposite directions within the very same precinct.
Leverage moves with the trend, not the headline figure.
Consider a tenant eighteen months from expiry, watching vacancy rise in their preferred precinct as new supply completes. That shift can support meaningful gains, fit-out contributions, rent-free periods, stronger make-good terms and improved expansion rights. But the same market can turn. As new supply is absorbed and construction slows, vacancy can tighten again, and the leverage a tenant assumed would still be there can disappear well before the lease is renegotiated, sometimes within a single reporting cycle. For now, single cycle movements in Australia are not a risk.
Boards rarely ask whether vacancy is high. The more useful question is whether it is still falling by the time the lease comes up for renewal.
For CFOs assessing lease timing, the vacancy rate on the day of signing matters less than its trajectory over the entire negotiation window, particularly when that window spans more than a year. Currently we see premium Sydney owners testing boundaries – pushing up effective rents. We are expecting they will overstep the mark and lose deals before realising the market is not there yet. That creates another mini cycle where rents plateau or dip as owners readjust down again to create transactions.
Ask where the trend is heading and why to understand your negotiating position.
